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Health Care Reform Memo: November 19, 2012

Deloitte Center for Health Solutions publication

The health care reform memos are issued on a weekly basis, highlighting news from the previous week's activities in the administration and implications for the C-suite and various stakeholder groups.

My take: a fast-paced, evolving health care industry

From Paul Keckley, Executive Director, Deloitte Center for Health Solutions

I don’t know the premises of some hit TV shows because I’ve never seen them, and I’ve not yet read a Tom Clancy or J.K. Rowling novel—my bad, I wait for the movies. I hear water-cooler chatter about music stars and TV sitcoms and am clueless. Beyond occasional sports, my TV viewing is news and public affairs, and my daily “must read” file always includes the same four daily newspapers, three medical journals, and eight online health industry daily reports. And I am easily frustrated by the gap between what I should devour and what I actually consume.

There’s a popular ad that uses the punchy tag, “Life comes at you fast.” That’s probably where we all are. Fast news cycles. Fast-paced demanding jobs. Fast changing world events. Even fast changing policies and politics in health care.

Consider, we re-elected President Obama just 13 days ago, and with his administration, most of the incumbents returning to the 113th Congress next year. But in that period, we’ve witnessed increased attention to conflicts in the Middle East and at home, Congressional efforts to address the fiscal cliff, ongoing recovery challenges from Hurricane Sandy, and the President’s trip to Asia this weekend.

The health care industry is just as frenetic: science comes at us fast—advances in genetic research brought us new insight about the diagnosis and treatment of Alzheimer’s last week, and we learned that pharmaceutical companies are looking at a series of protein-based therapies that will work in tandem with statins to better treat heart disease, our number one killer. We learned that multi-vitamins might not positively impact healthiness for some, while confirming that our lives are extended 3.4 years if we exercise at least 2.5 hours weekly. Go figure. In fact, 560 scientific studies were published last week, and that’s just the ones published in traditional medical journals that cover western medicine.

Policies and rules come at us fast: we received notice from the U.S. Department of Health and Human Services (HHS) last week about health insurance exchange (HIX) deadline changes, along with payment adjustments for several outpatient services, and its stepped up efforts to detect fraud using predictive analytics. And legislators in at least 33 states grappled with their plans for HIXs and expansion of their Medicaid programs.

And the industry’s changes come at us fast: health insurance plans and hospitals are competing for the hearts and minds of physicians announcing deals daily, and medical device and biopharma manufacturers are trying to navigate a path toward value-based pricing to avert being commodities in the supply chain.

For ordinary people, health care is confusing. Our surveys indicate consumers do not understand the U.S. health system. We are not inclined to be well-informed unless confronted in our teachable moments when health care comes at us fast. Open enrollment for our insurance is one of those—it means we are forced to figure out what insurance we need and how much it will cost within a short period of time. And when we or a family member are diagnosed with a new medical problem, it comes at us fast: if life threatening, nothing else matters. If not, we elect to catch the self-management train or miss it altogether because our lives are busy.

The equipping of consumers, policymakers, and industry leaders to manage the pace of change in this industry is perhaps our most significant need. In most communities, health care means local physicians, local hospitals and facilities, and insurance either obtained through a public program or employer, if eligible and affordable. But the health care system is much more, and its pace of change often challenging to incumbent stakeholders.

Moving from fee-for-service (FFS) to performance-based incentives; equipping consumers to share in clinical decision-making; leveraging technologies to reduce costs from error, paperwork, unnecessary care, and fraud; managing population health via teams; and embracing transparency and accountability in our insurance and delivery systems are propellants. The pace is quickening.

John Kotter’s monograph in the current issue of the Harvard Business Review—“Big Idea: Accelerate”—captures the urgent need well: “We can’t keep up with the pace of change, let alone get ahead of it…The hierarchical structures and organizational processes we have used for decades to run and improve our enterprises are no longer up to the task of winning in this faster-changing world…Any company that isn’t rethinking its direction at least every few years—as well as constantly adjusting to changing contexts—and then quickly making significant operational changes is putting itself at risk.”

The issues facing the health care industry are coming at all of us fast. And there’s no way to get out of the way or turn the clock back. Nor should we want to. But it requires our organizations to reward innovators who “break some glass,” leaders who understand the future of the industry, and build cultures that welcome new thinking, new partnerships, and new ways of operating.

Paul Keckely

Paul Keckley, Ph.D., Executive Director, Deloitte Center for Health Solutions

Implementation update

HHS extends health insurance exchange deadline

Late last Friday, HHS extended the deadline from November 16 to December 14, 2012 for states to submit their letter of intent to set up and operate their HIXs by January 1, 2014. Responding to a letter sent by the Republican Governor’s Association (RGA) on Wednesday requesting an extension, HHS Secretary Kathleen Sebelius stated, “while receiving a letter of intent now will help us [HHS] assist states in finalizing their application…a state may submit both a letter of intent and an application to operate its own exchange on December 14, 2012.” Many states had already announced their decisions earlier in the week, anticipating the previously set November 16 deadline. The following states have informed HHS of their exchange plans to date:

State-based Exchange Federal Partnership or Federally Facilitated Exchange
CA, CO, CT, DC, HI, IA, KY, MA, MD, MN, MS, NY, OR, RI, VT, WA IL, NC, OH, WI, GA, MT, SC

Note: several state governors made statements announcing they will not operate a state-based exchange, but declaration letters were not sent to HHS, or not yet available: AL, MT, ME, NE, IN.

Forthcoming federal guidance on the ACA

HHS has indicated it will provide guidance in coming weeks on these provisions of the Affordable Care Act (ACA):

Provision and Section of ACA Description Upcoming guidance
Essential health benefits (EHB), Section 1302
  • Ten statutorily required EHBs: ambulatory patient services; hospitalization; maternity and newborn care; mental health and substance abuse disorder services, including behavioral health treatment; prescription drugs; rehabilitative services and devices; lab services; preventive wellness and chronic disease management; and pediatric services, including oral and vision. Note: to date, at least 26 states and DC have identified a final or preliminary EHB benchmark plan.
  • HHS has yet to release final regulations defining EHB, and is expected to release guidance on plan compliance and parameters for Medicaid benchmarks, including mental health parity. A proposed rule was sent to the U.S. Office of Management and Budget (OMB) last week on health insurance requirements and the ACA, and is expected to be released soon. Note: the last guidance from HHS came in the form of frequently asked questions (FAQs) and was released in February 2012.
HIX, Section 1311
  • The ACA requires the Secretary of HHS to define minimum coverage requirements for qualified health plans (QHPs) that will be offered in the HIXs.
  • HHS sent a rule to OMB on the establishment of exchange program part II, appeals of eligibility determination and oversight and financial integrity. This proposed rule would implement Section 1311 of the ACA, and will provide guidance for QHPs, HIX, and will focus on EHBs, actuarial value, and oversight. The proposed rule should be released soon.
Individual mandate, Section 1501
  • Amends Section 5000A of Internal Revenue Service (IRS) code to require individuals to maintain minimum essential coverage beginning in 2014; failure to maintain coverage will result in a penalty.
  • The IRS is expected to issue guidance on the individual shared responsibility payment.
Employer penalties, Section 1513
  • Requires midsize and large employers offering unaffordable coverage (less than 60% actuarial value) or no coverage to pay a penalty.
  • HHS is expected to define “part-time” and “full-time” workers with regard to the coverage penalties, minimum value, and the methodology for accounting wellness credits and employer contributions to health reimbursement accounts into affordability of insurance coverage.
Preventive care services requirements offered through group plans, Section 1001
  • Group health plans are required to cover preventive benefits with no cost-sharing, including contraception.
  • HHS is expected to release further guidance on how certain religious employers can avoid the contraceptive coverage requirements.

Bible-publishing company legal challenge to contraceptive requirement to be heard

Section 1001 of the ACA requires that certain preventive services recommended by the U.S. Centers for Disease Control (CDC), U.S. Health Resources and Services Administration (HRSA), and U.S. Preventive Services Task Force (USPSTF) be covered by non-grandfathered group or individual health plans with no cost-sharing, including contraceptives. A bible-publishing company has challenged the contraceptive requirement in federal court, and is one of three companies to date to receive a preliminary injunction.

PQRI: physicians face quality reporting penalty

Per ACA Section 3002, Medicare rates are reduced for physicians who do not participate in the physician quality reporting system. The American Academy of Family Physicians (AAFP) estimates that participating in the Physician Quality Reporting Initiative (PQRI) along with meaningful use next year could save a physician $19,000 in avoided penalties. Successfully reporting quality measures and achieving meaningful use of an electronic health record (EHR) in 2013 will prevent a doctor’s Medicare rates from being reduced by 3.5 percent in 2015 for noncompliance.

Legislative update

GAO report: CMS fraud prevention system behind schedule, key to replacing “pay and chase” strategy

The CMS fraud prevention system (FPS) is behind schedule, per a U.S. Government Accountability Office (GAO) report released last week. The FPS, which is a predictive analytics system, has been operating since January 2011, but CMS has not met certain functionality benchmarks, such as integrating its data collection systems with claims processing data. Also, CMS has not developed reliable schedules for meeting functionality or determining effectiveness, but has said they will achieve these goals by January 2013.

Background: the FPS effort is part of a strategy to replace “pay and chase” methods of fraud surveillance with sophisticated methods of predicting and interdicting fraudulent behaviors before payments are made. Section 4241(e) of the Small Business Jobs Act of 2010 requires CMS to report on the use of predictive analytics no later than three months after the first complete year of implementation and to obtain certification from HHS Office of Inspector General (OIG) on the actual and projected savings from the use of this technology. CMS’ use of predictive analytics is an effort to preempt payments to providers likely to be fraudulent rather than “pay and chase” culprits after payments are made. In late October, Senators Tom Coburn (R-OK) and Orrin Hatch (R-UT) sent a letter to Acting CMS Administrator Marilyn Tavenner requesting documentation about the CMS FPS noting that CMS has missed the deadline for public accounting. Senators Coburn and Hatch indicated they did not receive a report by the deadline, despite several public speeches made by CMS officials that indicate more specific details about the FPS are available.

CMS updates Medicare payment rules

CMS released three notices impacting Medicare Part A and Part B payment policies last week:

  • Inpatient Hospital Deductible and Hospital and Extended Care Services Coinsurance Amounts for calendar year (CY) 2013: the percentage hospital deductible increase for hospitals paid under the inpatient prospective payment system (IPPS) is 1.8 percent, for hospitals excluded from the IPPS it is 2.05 percent. The estimated total increase in costs to beneficiaries is over $1 billion due to the increase in the deductible and coinsurance amounts, and the increase in the number of deductibles and daily coinsurance amounts paid.
  • Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible: beginning January 1, 2013, the standard Part B premium rate will be $104.90, a 5 percent increase from the 2012 premium rate. We estimate that this increase will cost approximately 48.1 million Part B enrollees about $2.4 billion for 2013. For individuals receiving Social Security benefits, the premium increase will be reduced, if the increase in the individual’s Social Security benefit due to the cost-of-living adjustment is less than the increase in the premium, except for beneficiaries who are required to pay an income-related monthly adjustment amount.
  • Part A Premiums for CY2013 for the Uninsured Aged and for Certain Disabled Individuals Who Have Exhausted Other Entitlement: the monthly Part A premium for these individuals will be $441, the reduced premium for certain individuals will be $243, a 2 percent decrease from 2012.

House GOP leaders introduce plan to streamline House oversight of health care legislation

Last week, Representatives Doc Hastings (R-WA), Reid Ribble (R-WI), and Rob Woodall (R-GA) sent a letter to their Republican colleagues in the U.S House of Representatives soliciting support to create a committee that is solely responsible for health care legislation and oversight. Representatives argue this would be a more effective alternative to what is currently in place and would help aid the House in making steps to overturn “Obamacare.”

Note: currently, several committees and subcommittees in the U.S. House of Representatives have health oversight:

U.S. House of Representatives, Committee Health related responsibilities
Committee on the Budget Manages budget process (i.e., budget resolution and hearings on funding levels for federal agencies)
Committee on Education and the Workforce ERISA (includes employer-sponsored health plans, voluntary employee benefits associations, and multi-employer benefits associations)
Committee on Energy and Commerce Public Health Services Act (includes CDC, National Institutes of Health [NIH], HRSA, private insurance), U.S. Food and Drug Administration (FDA) (drugs and devices), Medicaid and Children’s Health Insurance Program (CHIP), Medicare (parts B, C, and D)
Committee on the Judiciary Antitrust, information technology (IT), and tort liability issues
Homeland Security Committee Emergency preparedness and public health
Committee on Ways and Means Medicare (parts A, B-limited, C, and D), tax legislation

Health IT safety for consumers focus of attention

Representative and Chairwoman of the Subcommittee on Healthcare and Technology Renee Ellmers (R-NC) sent Secretary of HHS Kathleen Sebelius a letter requesting information about how HHS will reduce risks associated with health IT for patients. The request came on the heels of an Institute of Medicine (IOM) report that noted the medical literature on health IT safety varied and suggested HHS issue a plan to minimize adverse events associated with health IT. Representative Ellmers is requesting to see the IOM recommended report or any documents developed by HHS to date.

Congressional hearings on meningitis outbreak, intensified attention to compounding center regulatory oversight

Wednesday, the U.S. House of Representatives held a hearing to investigate the New England Compounding Center’s (NECC) role in the recent fungal meningitis outbreak, and on Thursday, the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) released a report on the outbreak and held its own investigative hearing. To date, the meningitis outbreak has been linked to 32 deaths and 461 infections. Testimony was heard from the CDC, FDA, Massachusetts Department of Public Health, Tennessee Department of Public Health, International Academy of Compounding Pharmacy, and the American Society of Health-System Pharmacists (ASHP). Notably, the Owner and Director of NECC was present at Wednesday’s House hearing by subpoena request, but invoked his fifth amendment right to not answer any of the questions asked by the committee, and did not attend the hearing in the Senate the following day.

FDA Commissioner Margaret Hamburg testified at both hearings, acknowledging the FDA could have been more timely in their reaction to the violations committed by NECC, but arguing that the agency’s regulatory powers over compounding pharmacies is “limited, unclear and contested.” Reacting to this statement, lawmakers including Senator Tom Harken (D-IA), expressed bipartisan interest in moving forward to fill the regulatory gaps in this area.

My take: compounding pharmacy oversight is timely and appropriate, given the testimony that lapses in NECC quality and safety had been recognized by the Massachusetts Board of Pharmacy dating back to 2002. The larger question is this: how should federal and state regulators oversee the 56,000 retail pharmacies in a cohesive way that protects the public while not debilitating the increasingly important role pharmacy plays in providing therapies and devices useful to consumers and, in some cases, at a lower cost.

Related: ASHP, a membership organization that works on behalf of pharmacists who practice in hospitals and health systems, testified at Thursday’s hearing stating, “…we strongly believe that FDA must be provided the resources it needs to perform serious and meaningful regulatory oversight of entities that are potentially engaged in manufacturing. Not to do so now will only hinder the agency in implementing legislation.”

(Source: U.S. Senate HELP Committee, “The New England Compounding Center and the Meningitis Outbreak of 2012: A Failure to Address Risk to the Public Health,” November 15, 2012)

Related: during the U.S. Senate HELP Committee hearing Thursday, FDA Commissioner Margaret Hamburg invited state officials to a meeting on December 19, 2012 to discuss federal and state regulation of compounding pharmacies to enhance coordination and prevent future adverse events.

Related: Representatives Edward Markey (D-MA), Henry Waxman (D-CA), John Dingell (D-MI), Frank Pallone (D-NJ), Diana DeGette (D-CO), and Anna Eshoo (D-CA) sent a letter to the Acting Comptroller General of the U.S. Gene Dodaro last week requesting the GAO investigate the following in light of the recent meningitis outbreak:

  • What impacts have contracting practices by market participants had on: access to medical devices and drugs, including an impact on drug shortages?
  • What market factors contribute to the reliance of hospitals and other health care providers on compounding pharmacies?
  • Do drug shortages drive hospitals and other health care providers to rely more heavily on purchases of drugs, including sterile injectable medications, from compounding pharmacies?
  • What is known about the impact Group Purchasing Organization (GPO) administrative fees have had on generic drug makers’ financial condition, their ability to maintain and upgrade plant equipment, and their ability to conduct quality control?
  • Do the incentives in the current GPO model lead to inflated prices for drugs and devices? What is known about the competitive and budgetary impacts on both hospitals and the Medicare program that could result from eliminating the GPO safe harbor exemption from the Medicare anti-kickback statute?

State update

State round-up

  • A new immigration law in Georgia requiring all residents, regardless of birthplace, to prove their citizenship and/or legal residency as they renew professional licenses is causing many health care workers in the state to lose their license to practice. The Georgia Deputy Secretary of State has indicated that with too few staff to process the paperwork, the workload has become too much and health professionals are losing their licenses as a result. The Director of Georgia’s medical board estimates that up to 1,300 doctors and other medical practitioners have lost licenses as a result of this law—some as a result of not submitting the new paperwork, others as a result of the backed up applications that have yet to be processed. To date, no undocumented immigrants have been discovered through the new document requirements.
  • While Governor Dennis Daugaard (R) has yet to make a decision on the expansion of South Dakota's Medicaid program, physicians and hospitals in the state are urging the Governor to expand the program. Not expanding the state’s Medicaid program will leave approximately 48,000 residents of the state uninsured, according to the South Dakota Association of Health Care Organizations—mostly adults without children. Governor Daugaard has stated he is conducting a cost study to determine whether the state can afford to expand and doesn’t expect to make changes to the Medicaid program until 2015 or 2016.
  • Responding to a Los Angeles Times investigation into accidental deaths from prescription drugs in four southern California counties last week, state Senator Curren Price Jr. (D-Los Angeles) introduced legislation that would require all coroners in the state to report prescription drug deaths to the Medical Board of California. The Los Angeles Times found that more than 3,700 deaths in the four counties involved prescription drugs, and in 1,762 cases (47 percent), drugs that had been prescribed to the patients were the sole cause or a contributing cause of death. In addition, the report identified 71 physicians in the area who had prescribed drugs to three or more patients who later overdosed and died.
  • Wednesday, the Ohio House Health and Aging Committee approved a bill that will put in place a ranking system for funding family planning with Planned Parenthood at the bottom of the list. The bill will now be voted on by the full state House. Note: Ohio is one of ten states seeking to decrease funding for Planned Parenthood.
  • Wednesday, Mississippi Governor Phil Bryant (R) filed a budget for fiscal year (FY) 2014 that recommends Medicaid receives $878.4 million that covers 750,000 state residents. In addition to recommending more than $40 million less than the Division of Medicaid requested, Governor Bryant stated that “expanding Medicaid will cost the State of Mississippi money that it does not have.”
  • TBD Colorado, a nonprofit advisory board created by Governor John Hickenlooper (D), is pushing for older adults and individuals with disabilities in the state to receive quality home health care. The program is designed to keep individuals out of nursing homes and give them better access to home- and community-based services. Nearly 91 percent of those Coloradans surveyed support the legislation.

Industry news

Channel choking strategy extends to shippers

The Drug Enforcement Agency (DEA) and the Department of Justice (DOJ) sent subpoenas to UPS and Federal Express four years ago regarding illegal drug sales from online pharmacies and are now moving forward with the investigation. The government’s pursuit also extends to drug distributors and retail pharmacy chains intended to interdict the supply of opioids to addicts costing 15,000 deaths last year.

My take: channel choking (i.e., going after drug manufacturers, distributors, and shippers) is a strategy intended to affect costs associated with pain medication addiction and pill mills that cater to these consumers. The key question for policymakers is this: is the best strategy for addressing the problem channel choking, or a crackdown on the prescribers who profit most from the practice? Channel choking might have the unintended consequence of adding costs to manufacturing and distribution costs without addressing the root cause: inappropriate prescribing.

Study: pay for performance linked to reduced mortality

A New England Journal of Medicine (NEJM) study on a pay for performance program used in 24 UK hospitals concluded that that pay for performance significantly reduced mortality for patients admitted for pneumonia, heart failure, or acute myocardial infarction. Researchers looked at patient data 18 months prior to and after the implementation of pay for performance using a difference-in-differences regression analysis. (Source: Sutton et al, NEJM, “Reduced Mortality with Hospital Pay for Performance in England,” 367:19, November 8, 2012)

Background: per Section 3001 of the ACA, after October 1, 2012 hospitals will be reimbursed based on certain quality measures through the Medicare Hospital Value-based Purchasing program. Reimbursements will be made based on whether a hospital meets or exceeds the performance standards established.

Medical device industry pushes for excise tax repeal

As post-election deficit reduction negotiations began on Capitol Hill last week, the medical device industry again urged Congress to repeal the 2.3 percent excise tax on medical devices scheduled to take effect January 1, 2013 per Section 9009 of the ACA. Over 800 medical device technology organizations wrote to Senate majority leaders asking them to reconsider the excise tax in the current lame duck session, as they believe it will negatively affect patient care, innovation, and substantially increase the costs of health care. According to the industry groups, the tax is already having an adverse impact on research, development investment, and job creation, which will only worsen if the tax is implemented.

Background: in July 2012, the Congressional Budget Office (CBO) projected that repeal of the excise tax on manufacturers and importers of certain medical devices would reduce federal revenues by $29 billion between 2012 and 2022. (Source: CBO, “Estimated Budgetary Effects of Repealing the Affordable Care Act,” July 2012)

The tax—equal to 2.3 percent of the sale price—is imposed on the sale of any taxable medical device by the manufacturer, producer, or importer of such device. A taxable medical device is any device defined in Section 201(h) of the Federal Food, Drug, and Cosmetic Act, intended for humans. The excise tax does not apply to eyeglasses, contact lenses, hearing aids, and any other medical device determined by the Secretary to be of a type that is generally purchased by the general public at retail for individual use. The Secretary may determine that a specific medical device is exempt under the provision if the device is generally sold at retail establishments (including over the Internet) to individuals for their personal use. The exemption for such items is not limited by device class as defined in Section 513 of the Federal Food, Drug, and Cosmetic Act. Items purchased by the general public at retail for individual use could include Class I items, such as certain bandages and tipped applicators; Class II items, such as certain pregnancy test kits and diabetes testing supplies; and Class III items, such as certain denture adhesives and snake bite kits. It is anticipated that the Secretary will publish a list of medical device classifications that are of a type generally purchased by the general public at retail for individual use.

For more information about the device excise tax, please see the following report: Medical device excise tax—Are you ready?

AARP asks Congress to override scheduled SGR cuts while replacing the SGR

Last week, AARP, in alliance with AAFP, American College of Physicians, American Geriatrics Society, Center for Medicare Advocacy, Inc., and Medicare Rights Center sent a letter to Congress urging House and Senate committee members to postpone the 27 percent reduction in Medicare provider payments scheduled to take effect January 1, 2013 due to the scheduled Sustainable Growth Rate (SGR) adjustment. The letter expressed their concerns that the pay cuts would harm access to care for older adults and individuals with disabilities. The groups asked that Congress repeal the SGR, and pass the longest possible legislative “fix” while developing a new payment mechanism.

Note: setting aside the SGR will cost $9 billion which, added to previous SGR set-asides, brings the accrued liability to $310 billion. It is highly likely Congress will approve another set aside, the 14th since 2003, and pay for it by changing coding for hospital outpatient services to be the same as ambulatory coding for the same tests and procedures.

My take: the SGR is not working. Congress will not cut physician pay, so a permanent fix to a Medicare physician compensation formula is necessary that balances access to a physician workforce and competencies required. That formula would benefit from input from purchasers and consumers, should consider the role of technologies and incentives that will change from FFS to value, and should include consideration of the roles of mid-level professionals who are allowed to practice at the highest level of their training.

For more information about the SGR, please see the Deloitte Center for Health Solutions publication, Understanding the SGR: Analyzing the “Doc Fix”.

OIG: upcoding prevalent in skilled nursing

The HHS OIG released a study based on a medical record review of skilled nursing facilities’ (SNF) reimbursement claims concluding that 25 percent of all claims in 2009 were made in error resulting in $1.5 billion in inappropriate Medicare payments. According to the report, 20.3 percent of SNF claims were upcoded, 2.5 percent of claims were downcoded, and 2.1 percent did not meet Medicare coverage requirements. In addition, SNFs misreported therapy on 30 percent of claims, and information on the Minimum Data Set (MDS) used to assess a beneficiary’s clinical condition, functional status, and expected and actual use of services on 47 percent of all claims. CMS agreed with all of the following HHS OIG recommendations:

  • Increase and expand reviews of SNF claims
  • Use the FPS to identify SNFs that are billing for higher paying resource utilization groups
  • Monitor compliance with new therapy assessments
  • Change the current method for determining how much therapy is needed to ensure appropriate payments
  • Improve the accuracy of MDS items
  • Follow up on the SNFs that billed in error

Background: SNFs provide skilled nursing care, rehabilitation services, and other services to Medicare beneficiaries who meet certain conditions. In FY2012, Medicare paid $32.2 billion for SNF services. In its 2007 and 2011 reports to Congress, the Medicare Payment Advisory Commission (MedPAC) raised concerns about SNFs improperly billing for therapy to obtain additional payments, and that the payment system “encourages SNFs to furnish therapy, even when it is of little or no benefit.”

Report: primary care physician workforce needs 2010-2025

Per the Agency for Health Care Research and Quality (AHRQ) funded study, primary care provider utilization is projected to increase from 462 million in 2008 to 565 million in 2025. Due to population growth, aging, and ACA insurance coverage expansion provisions researchers estimate that the U.S. will need almost 52,000 additional primary care physicians—a 3 percent increase—by 2025. The report concluded that population growth would be the most significant driver of increased utilization (33,000 additional physicians), followed by population aging (10,000 additional physicians), and insurance expansion (more than 8,000 additional physicians).

(Source: Annals of Family Medicine, “Projecting U.S. Primary Care Physician Workforce Needs: 2010-2025,” November/December 2012)

My take: traditional models forecasting demand for medical professionals fail to adequately account for three trends that mitigate findings based on prior utilization: 1) incentives to manage population health using technologies and allied health professionals are inadequately considered, 2) the emergent role of consumers in self-care using devices and over-the-counter therapies is not adequately factored, and 3) the role and scope of allied health professionals in traditional and alternative health roles is under-reported. Therefore, we believe the shortage of primary care services is substantial, but it does not necessarily result in a shortage of physicians per se. For more information, the Deloitte Center for Health Solutions publication Primary Care: Today and Tomorrow outlines solutions to the primary care shortage using new business models, new incentives, and accelerated use of ITs that shift the epicenter of primary care from providers to consumers.

  Total U.S. professionals Degree and education Clinical training Total years education and training
Physicians: Medical Doctors (MDs) and Doctors of Osteopathic Medicine (DOs) 661,400 Requires 4 years undergraduate (B.A. or B.S.) degree with pertinent science coursework; 4 years medical school Residency training is required to practice clinically, typically 3 to 7 years; may be followed by fellowship of 1 to 3 years to further specialize 11-18 years, depending on residency and fellowship
Nurse practitioner (NP) 140,000 Requires registered nurse (RN) training (through bachelors or associate degree), and NP master’s degree (2 years) or doctorate (4 years); national board certification by area of specialty through state nursing boards Advanced clinical training is part of RN and NP education programs; no additional clinical requirements after certification 4-6 years
Physician Assistant (PA) 74,800 Accredited PA educational programs include certificate programs and master’s, bachelor’s, and associate degrees; all require at least 2 years, and admissions requirements vary; many students have B.A.s prior to entering; all graduates must pass the Physician Assistant National Certifying Examination to practice Some clinical training is included in PA educational programs; additional education is possible after attaining certification but is not required 4-6 years
Pharmacist 269,900 2 years of professional study, usually at a college or university, are required to pursue a degree, followed by 4 years of a Pharm.D. program Pharm.D. studies include some clinical training; 1 to 2 year residency and fellowship programs are available but not required 6-10 years, depending on undergraduate degree fulfillment, residency, and fellowship

Source: Deloitte Center for Health Solutions, Primary Care: Today and Tomorrow, September 2011

WellStar acquires Center for Health Transformation

Wednesday, WellStar Health System announced that it had acquired the rights of the Center for Health Transformation (CHT), a think tank established by former U.S. House of Representatives Speaker Newt Gingrich (R-GA) in 2003. According to the press statement, CHT will operate as an independent, invitation-only, non-partisan entity with funding provided by a membership of 20 non-competing, not-for-profit health systems, which will evaluate best transformational and innovative practices aimed at delivering higher quality health care at lower costs. WellStar’s senior vice president for medical management and Chief Health Innovation Officer, Dr. Robin Wilson, was been named executive director of the CHT.

Background: Speaker Gingrich divested himself from CHT in May 2011 to bid for the Republican presidential nomination. CHT filed for Chapter 7 bankruptcy in April 2012, with estimated liabilities of $1 million to $10 million and 50 to 90 creditors. CHT generated $59 million in revenues over nine years from more than 300 drug manufacturers, health insurers, and hospitals paying as much as $200,000 in annual dues.

Drug distribution group urges Congress to pass track and trace legislation

The Pharmaceutical Distribution Security Alliance (PDSA), a coalition representing the pharmaceutical, distribution, and manufacturing stakeholders that advocated for the prescription drug “track and trace” legislation released a statement supporting the bipartisan draft recently released by the Senate HELP Committee. “The PDSA remains hopeful lawmakers will build on these many months of hard work and enact into law supply chain legislation that provides American consumers with a single, uniform national system, one that can be modified over time as technologies evolve and that provides meaningful protections and safeguards for patients on day one.”

Background: “track and trace” language was included in the re-authorization of the Prescription Drug User Fee Act (PDUFA) of 2012 this summer, but was removed due to industry opposition. Many manufacturers oppose the use of individual identifiers that require tracking of single packages of drugs but favor tracking at the lot level. A federal track and trace system would allow the FDA to track a drug from its origination, through the manufacturing process, to the point of sale.

Report: deficit reduction plans should protect seniors

Tuesday, the Center for American Progress (CAP), released “The Senior Protection Plan,” a 40-page deficit reduction proposal outlining $385 billion in health care savings, and generating up to $100 billion in revenues over the next ten years. Using estimates from the CBO and the MedPAC, CAP recommended the following proposals to protect Medicare, senior citizens, and to achieve a fair and balanced debt-reduction package:

  • Enhance competition based on price and quality
  • Increase transparency of price and quality information
  • Reform health care delivery to provide better care at lower cost
  • Repeal the SGR mechanism
  • Reform graduate medical education and the workforce
  • Reform Medicare premiums and cost-sharing
  • Reduce drug costs
  • Bring Medicare payments into line with actual costs
  • Cut administrative costs and improper payments
  • Reduce the costs of defensive medicine
  • Reform the tax treatment of health insurance
  • Promote better health

Organ donation regulators want hospitals to do more to protect kidney donors

At a Board of Directors meeting held last week, the Organ Procurement and Transplantation Network (OPTN) and the United Network for Organ Sharing (UNOS) updated policies to specify a minimum set of required tests and procedures for the medical and psychosocial evaluation of potential kidney donors, requirements for informed consent for the donation procedure, and the role of an independent donor advocate. The Board also approved new reporting policies requiring transplant programs to provide status and clinical information for 80 percent of living kidney donor and common laboratory test results for 70 percent of living kidney donors for up to two years post-donation. OPTN/UNOS are currently in the process of updating similar policies for liver donors.

Background: in 2009, 16,830 patients on the UNOS waiting list underwent kidney transplant. The rate of living kidney donations increased by 7 percent, and was highest for patients aged 35 to 49 years, and lowest for those aged 0 to 17 years. There are currently 94,450 in the U.S. on the waiting list for kidney transplants.

HHS announces first external innovation fellows

Tuesday, HHS Secretary Kathleen Sebelius announced the first six individuals selected for the external Innovation Fellows Program. These fellows were chosen from more than 100 applicants, and will be paired with internal HHS innovation fellows to use their private sector expertise to address complex problems in health care. HHS developed the following four high-priority projects, which the external fellows will be assigned to for six months to a year:

  • Accelerating clinical quality measures for the ACA
    Fellow: Mindy Hangsleben, Innovator in Lean Methodology, Portland, Oregon
  • Designing the infrastructure for Medicaid and CHIP eligibility
    Fellows: Zachery Jiwa, Health Care Technology Executive, Baton Rouge, Louisiana; Chris Lunt, entrepreneur, San Francisco, California
  • Building health resilience technology to withstand natural disasters
    Fellow: Frank Sanborn, eCommerce Technologist, Seattle, Washington
  • Devising electronic tracking and transport of the nation’s organ transplant system
    Fellows: David Cartier, IT Supply Chain, Roswell, Georgia; Clive Hohberger, Applied Physicist and Barcode RFID Expert, Chicago, Illinois

Gene discovered that predicts Alzheimer’s

Iceland researchers discovered a variant of TREM2, a gene found more often in Alzheimer’s patients, then replicated the study in the U.S., Germany, Norway, and the Netherlands. Alzheimer’s affects 5.2 million in the U.S.

Note: TREM2 is only the second gene to be discovered related to Alzheimer’s, which has no known cure. When the gene mutates, people have a three to five times higher likelihood of Alzheimer’s than otherwise. In recent years, the ability to diagnose Alzheimer’s has leapt ahead of treatments. For instance, a new technology that shows plaques in the brain, which went on the market in June, is now available in 300 U.S. hospitals (UCL Institute of Neurology led the study in the UK).

FDA publishes data about energy drink risks

Thursday, the FDA issued a press release announcing its continued investigation of the adverse consequences associated with energy drinks, which are regulated as dietary supplements by the FDA. The agency examined filings against three companies whose products had been alleged to be associated with 18 deaths dating back to 2004 and published these results at the end of October. Per the Substance Abuse and Mental Health Services Administration (SAMHSA), emergency room visits involving consumption of energy drinks increased to 12,000 last year.

Life after Lipitor: research focuses on protein

Researchers in several pharmaceutical companies are investigating a protein, PCSK9, which interferes with the body’s ability to clear LDL (the bad cholesterol) that preliminary studies show might reduce heart disease up to 50 percent if used in tandem with a statin.

Note: 71 million Americans have high LDL (Source: CDC).

Quotable

“Whenever I hear, as often I do these days, that informed health care consumers can fix our health care system by shopping around, I remember my own paralysis, mistakes and inability to find the information I needed. While choice may be great, negotiating through it is daunting and it seems unlikely to remedy what ails our health care system.”

— Dahlia K. Remler, The Washington Post, “A $60,000 Dilemma: Facing Brain Surgery, a Health Economist with a Ph.D. finds it Difficult to Navigate the Maze of Insurance Coverage,” November 6, 2012

“The story of how the promising therapy (Hepatitis C) got stalled despite positive research illustrates a little acknowledged truism in the pharmaceutical industry: sometimes drugs die not because they don’t work or are unsafe, but because they don’t make business sense.”

—Jonathan D. Rockoff, The Wall Street Journal, “Hepatitis C Drug Derailed by Deal,” November 15, 2012

“Hundreds of nursing homes overcharge Medicare every year for so-called skilled services adding $1.5 billion in annual costs to the program, according to a federal report release Tuesday. About one-fourth of Medicare bills from facilities examined in the report were incorrect. The majority of these claims involved so-called upcoding, where a nursing home or other provider inflates the cost of its bill to Medicare by claiming more intensive services were done than actually performed. In other cases, nursing homes provided treatments that were inappropriate,”

Thomas Burton, The Wall Street Journal, “Nursing Homes Said to Overbill U.S.,” November 13, 2012

Fact file

  • Health care as an issue priority in next term: ranking of issue by key groups:
      All Americans Democrats Republicans
    Take major steps to restore a strong economy/job market 1 1 1
    Take major steps to ensure long-term stability of Social Security and Medicare 3 2 4
    Make major cuts in federal spending 5 9 3
    (Source: USA Today/Gallup Poll of 1,009 U.S. adults, November 9-12, 2012, margin of error +/-3 percent)
  • Election results at state level: 30 Republican governors were elected November 6, the highest number since 2000. Legislatures: Democrats hold the majority in 19 legislatures, up from 15 in 2000; Republicans control both chambers in 26 states. Control in three states is split between the parties, the fewest to be split since 1944. (Source: National Conference of State Legislatures)
  • Fiscal cliff: slightly more than half of Americans, 51 percent, anticipate leaders in Washington will be unable to reach an agreement to avoid the approaching fiscal cliff, compared to 38 percent who believe the sides will find a solution. If the two parties cannot reach a deal, 53 percent of those polled would hold congressional Republicans at fault while only 29 percent would blame President Obama. (Source: Pew Research Center for the People & the Press, “Broad Concerns about ‘Fiscal Cliff’ Consequences,” November 2012)
  • Presidential election results: President Obama held a narrow advantage over Governor Romney among voters who said the health care reform law was a major factor in their vote, 47 percent to 46 percent. But the President held much stronger support among voters who viewed health care as their top issue; 75 percent to 24 percent margin. Post-election the percentage of Americans hoping to see the ACA completely repealed reached an all-time low of 33 percent. (Source: Kaiser Family Foundation)
  • Antibiotics: 79 percent of U.S. adults understand they may be endangering their own health by unnecessarily taking antibiotics. However, 47 percent recognized that doing so could also potentially harm others by exposing them to the risk of antibiotic-resistant bacteria. In addition, 36 percent mistakenly view antibiotics as effective treatment for common viral infections like the cold and flu. (Source: Pew Research)
  • Readmission rates: heart failure patients treated by cardiologists were found to be readmitted far less often compared to patients attended to by a hospitalist, 16 percent vs. 27.1 percent. Total average costs for cardiologist treated heart failure patients were $2,109 higher than the costs incurred by hospitalist patients. (Source: Minneapolis Heart Institute Foundation, “HF Patient Treated by a Cardiologist, Rather than Hospitalist, Have Fewer Readmissions,” November 6, 2012)
  • Medical homes: since 2006, 25 states have advanced efforts to utilize patient-centered medical homes by implementing or revising related payment systems for primary care providers. (Source: Health Affairs, “About Half of the States are Implementing Patient Centered Medical Homes for their Medicaid Populations,” November 2012)
  • Diabetes: all 50 U.S. states, the District of Columbia, and Puerto Rico observed significant growth in their rates of diagnosed diabetes during the period from 1995 to 2010; 42 states saw their diagnoses increase 50 percent or more while 18 states grew by more than 100 percent. Oklahoma (226 percent), Kentucky (158 percent), Georgia (145 percent), Alabama (140 percent), and Washington (135 percent) experienced the largest increases. (Source: CDC)
  • Smoke-free cities: according to the CDC, 30 of the nation’s 50 largest cities now enforce comprehensive smoke-free laws, covering roughly half of the total U.S. population. In 2000, San Jose, CA was the only major city with such an ordinance. (Source: CDC)
  • Bundled payments and post-acute costs: Medicare spends more in the 90 days after hospitalization than it spends for the initial hospitalization; for patients admitted with chronic illnesses, such as congestive heart failure, post-acute care spending can average twice the cost of the initial hospital stay, and 90-day readmission rates can exceed 40 percent. (Source: RTI International, “Post-Acute Care Episodes: expanded analytic file data,” Report to the Assistant Secretary of Planning and Evaluation,” June 2011)
  • Tax deduction elimination math 2013-2022: capping deductions at $50,000 raises $749 billion, caps at $25,000 raises $1.286 trillion, caps at $17,000 raises $1.747 trillion. (Source: Tax Policy Center)
  • Preventive health: one in five hospitalized patients smokes during a hospital stay (Source: Archives of Internal Medicine); physicians are 28 percent less likely to screen for high blood pressure in college age adults than those older than 60 (Source: University of Wisconsin School of Public Health); Americans who get 2.5 hours of exercise/week live 3.4 years longer than those that don’t (Source: PLoS Medicine).
  • Operating performance considered by venture investors: 47 percent of venture-backed firms are providing operational metrics along with financial reports, up from 26 percent in 2011. (Source: Wilson Sonsini Goodrich and Rosati)
  • Election night viewing: 66.8 million watched election night results vs. 71.5 million in 2008; $952 million was spent on 1.4 million TV ads in 2012 vs. $652 million on 1.2 million ads in 2008; Twitter followers of President Obama: 23 million in 2012 vs. 100,000 in 2008. (Source: The New York Times, November 8, 2012)
  • Small business: of 27 million small businesses, 25 percent have only one employee, 8 percent reach 20 employees in 10 years; 75 percent do not seek to grow; 6.3 percent of small businesses contributed all net new jobs in the economy between 1994 and 2008—10.8 million jobs. (Source: Aaron Chatterji, Duke University Fuqua School of Business; Brookings Papers on Economic Policy, Fall 2011; Small Business Administration)
  • Administrative costs: the average U.S. physician spends: 43 minutes daily interacting with health plans about coverage or authorizations costing $29,000 per physician per year, three hours annually submitting credentialing information to 18 different organizations (with staff spending an additional 20 hours); total administrative costs of the system are $361 billion annually. (Sources: Yong at el, “The healthcare Imperative: Lowering costs and improving outcomes,” National Academy Press 2010; Pope, “The Cost of Administrative Complexity: Administrative intricacies add no value to healthcare,” MGMA 2004: 4:36-41)
  • Student achievement in suburbia: comparison between countries: of American 15-year-olds with at least one college-educated parent, 42 percent are proficient in math vs. 75 percent in Shanghai and 50 percent in Canada. The Harvard research team concluded the gross domestic product (GDP) would be $1 trillion stronger if the U.S. was at Canada’s level of achievement. (Source: Program for International Student Assessment)
  • Meaningful use: Medicare and Medicaid EHR payments totaled $8.36 billion at the end of October 2012; 165,800 eligible physicians and hospitals are recipients to date. In October, $645 million was disbursed to eligible hospitals and physicians: $435 million through Medicare, and $210 million through Medicaid. (Source: Government HealthIT, “Medicare, Medicaid EHR meaningful use payments surpass $8B in October,” November 2012)
  • Federal tax receipts as percent of U.S. GDP in 2012: 15.8 percent—lowest since 2001 (20.6 percent). (Source: CBO)
  • Network TV viewing: percent watching live prime time down to 77 percent in 2012; 23 percent of prime time viewing is on delayed basis (38 percent for young adults)—overall TV viewing down 9 percent among young adults. (Source: Nielsen)
  • White House 2013 Budget: increased taxes for families above $250,000 and individuals above $200,000—deficit reduction of $1.4 trillion over 10 years: reinstate the limitation on itemized deductions, $122 billion; reinstate the personal exemption phase-out, $41 billion; reinstate the 36 percent and 39.6 percent rates, $442 billion; tax qualified dividends as ordinary income, $206 billion; tax net long-term capital gains at a 20 percent rate, $36 billion. (Source: OMB, “Fiscal Year 2013 Budget of the U.S. Government,” February 2012)
  • Federal Deficits: CBO, U.S. Department of the Treasury
      2007 2008 2009 2010 2011 2012
    Receipts 2568 2524 2105 2163 2302 2449
    Outlays 2729 2983 3518 3456 3599 3538
    Deficit 161 459 1413 1293 1297 1089
    % GDP -1.2% -3.2% -10,1% -9.0% -8.7% -7.0%
    Note: for FY2012, tax revenue increased 6.4 percent including individual tax revenues up 26 percent ($233 billion), 4 percent decrease in defense spending, 24 percent decrease in jobless benefits, and 8.9 percent decrease in Medicaid spending.
  • College debt: fastest growing population of student loan debt—adults older than 60—total of $45 billion in debt. (Source: Federal Reserve)
  • Mobile health apps: 247 million worldwide will download a health app in 2012; one in five claims to treat a disease; of 331 therapeutic applications, 43 percent used cell phone sound for treatments. (Source: Research2Guidance)
National health reform: What now?

National health reform: What now?

At Deloitte, we continue to explore and debate the key questions facing 
the industry, and we look forward to helping our clients find and implement 
the right answers for their organizations. To learn more, visit www.deloitte.com/us/healthreform/whatnow today.

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